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Walmart buys 77% stake in India's Flipkart for US$16 bln

May 10 2018 by Cristina Jennings

"I could sell", he once wrote. It also bought majority stake in companies like Jeeves and ngpay.

The whopping $16-billion mega deal by global retail giant Walmart with the country's leading e-tailer Flipkart for majority stake makes India an attractive destination for global majors in the digital space, industry experts said on Wednesday. This includes unwinding its commercial agreements with Flipkart and terminating Flipkart's license to use the eBay.in brand.

In a country where hyper-local mom-and-pop stores dominate, Walmart and Amazon are betting that groceries will emerge as a sweet spot. Early investors like Accel Partners and Tiger have made excellent returns.

Now the question for Walmart is whether shareholders are willing to hang in there to see what kind of results the retailer can get from this long-term bet. The deal, advised by JP Morgan from the Walmart side and Goldman Sachs for Flipkart, would bring in the largest piece of FDI into India. The acquisition is the culmination of negotiations that started some 19 months ago and, according to some reports, at one point saw Amazon.com Inc. join the fray with a counter-offer.

"They seem to be somewhat Amazon obsessed", he said.

Both sources said that Flipkart Group Chief Executive Binny Bansal held a closed-door meeting with the firm's top leadership at its Bengaluru headquarters on Monday, and one added that Bansal said that Flipkart co-founder Sachin Bansal would exit after the Walmart deal is sealed.

Investors did not necessarily share his enthusiasm.

Walmart is begging for Wall Street's patience.

Walmart is famous for their 'Everyday Sale Business Model', wherein massive discounts are given to customers, every day. The employees are in for a treat as $500 million is outlined towards liquidating employee stocks as part of the entire deal, said two people familiar with the matter to the publication. This is an extension of Walmart's global expansion strategy. It expects earnings for the current fiscal year to be hurt by 25 to 30 cents per share.

For now, India will become the new battleground for Walmart and the Jeff Bezos-run Amazon.

Flipkart also focused early on mobile phone users, and in 2016 became the first app in India to reach 50 million users. Parcel specializes in getting fresh and perishable food to homes in New York City.

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"It's typical of a business like this that, as you scale up, you will have losses".

It expects sales in North America, its biggest market, to ease slightly to 2.8 million units, while sales in Asia are seen rising to 1.67 million units from 1.54 million a year ago.

Many of Walmart's shoppers in its stores tend to be in the lower and lower-middle income brackets.

Indian retail's deal counter will keep buzzing.

Walmart has renewed its focus on catching up with rivals in key worldwide markets.

Flipkart will leverage Walmart's omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while its talent, technology, customer insights and innovative culture will benefit the U.S. retail giant in India and elsewhere. But that deal has shown signs of trouble. Mr Bansal said in a Facebook post.